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iven its plan to boost the use of electric vehicles, China’s love of nickel is projected to remain robust in the years to come, making it crucial for the country to make long-term investments in Indonesia, which is home to 40 percent of the world’s high-grade lateritic nickel ore.

The price of benchmark nickel for three-month delivery on the London Metal Exchange (LME) reached US$12,945 per ton on Nov. 7, the highest price since June 2015, on the back of soaring demand from China.

Within the first nine months of 2017, China imported 26 million tons of nickel ore and concentrates, up nearly 9 percent compared with the same period last year. In September alone, its nickel imports stood at 5.67 million tons, the highest monthly figure since January 2014.

Nickel is also used widely in mobile phones, food preparation equipment, buildings, steel products and power generation.

Mirae Asset Sekuritas Indonesia analyst Andy Wibowo Gunawan predicted that global nickel demand would increase further following China’s plan to restrict the production and sale of fossil fuel vehicles to address pollution.

“To move from fossil fuel vehicles to electric vehicles, China will need a large number of raw materials for the manufacturing process. This should boost global nickel demand over the long term, as the raw materials required to make electric vehicle batteries mostly comprise nickel, graphite and lithium,” Andy said recently in a note.

Macquarie Research has also estimated that nickel use in electric vehicle batteries could grow by an average of 20 percent a year until 2022, when prices might reach $17,500 per ton.

At the same time, global deficit in nickel supply is predicted to average around 58,300 tons a year in the period between 2018 and 2020, after reaching as high as 108,000 tons this year.

Hence, as Indonesia implemented a raw mineral exports ban in 2014, Chinese investors have flocked to the archipelago to put their money into the development of various nickel smelters in an effort to secure a long-term supply of nickel-based products, including nickel pig iron (NPI) and stainless-steel slab.

From 2012 to 2016, Indonesia saw the development of 32 new processing facilities with a total investment of $18 billion, 24 of which were nickel smelters and 16 of which were located in Sulawesi.

As of last year, Indonesia’s measured nickel resources stood at 1.43 billion tons, while its proven nickel reserves were at 238.64 million tons.

One Chinese investor that has invested significantly in Indonesia is PT Indonesia Morowali Industrial Park (IMIP), which is developing a nickel-based industrial complex measuring 2,000 hectares in Morowali regency, Central Sulawesi, with an investment of more than $5 billion.

When the Morowali industrial complex has been fully developed in 2019, IMIP estimates it will process around 14 to 19 million tons of nickel ore per year in four nickel smelters operated by its affiliates in the industrial estate.

The Morowali complex will also produce 3 million tons of stainless-steel slab, all of which will be used to manufacture 2.5 million tons of hot rolled coil (HRC) and 500,000 tons of cold rolled coil (CRC) per year.

“We will eventually export all of our HRC because, at present, the country has no facilities to process such material,” said IMIP chief executive officer Alexander Barus, adding that the CRC might also be exported if there was no domestic demand.

Nickel miner PT Central Omega Resources (COR) Industri Indonesia has also teamed up with Marconing Group from China to develop a smelter worth Rp 5.5 trillion ($406.62 million) in North Morowali, Central Sulawesi.

The smelter, which has the capacity to produce 300,000 tons of NPI per year, was commissioned in July and will see 90 percent of its production exported to China.

Additionally, there is also Bantaeng Industrial Park (KIBA), which occupies roughly 3,000 hectares in South Sulawesi with a total investment value of around $5 billion.

The Bantaeng administration has stated that two nickel smelters are set to start operations at KIBA this year.

Those smelters are being built by joint ventures between local Indonesian companies and Chinese investors, namely PT Titan Mineral Utama, with an investment of Rp 4.7 trillion ($352.6 million) and PT Huadi Nickel-Alloy Indonesia with an investment of Rp 1.7 trillion.

Meanwhile, another Chinese firm PT Virtue Dragon Nickel Industry is developing an industrial estate measuring 2,200 ha in Konawe, Southeast Sulawesi, with an investment value of around $5 billion.

It is currently finalizing the construction of a ferronickel smelter with a production capacity of 600,000 tons a year.

“We are focusing on developing mineral processing facilities in eastern Indonesia, especially for nickel ore, as can be seen in industrial parks in Morowali, Bantaeng and Konawe,” said I Gusti Putu Suryawirawan, the Industry Ministry’s director-general for metal, machinery, transportation equipment and electronic industries.

Therefore, the Industry Ministry expects that the current efforts to the strengthen nickel processing sector will eventually bear fruit by 2020, when Indonesia is projected to be able to produce at least 4 million tons of downstream nickel products a year, or about 10 percent of the total global demand.

The realization of China’s foreign direct investment (FDI) in Indonesia grew 72.2 percent to $2.73 billion in the first nine months of 2017, slower compared with the staggering 291.5 percent growth to $1.58 billion in the same period last year.